Most proteins encoded by members of the Ly-49 gene family are class I- recognizing receptors on murine natural killer (NK) cells. Class I recognition by Ly-49 receptors usually results in inhibition of NK cell lysis of target cells. However, NK cells function not only in a lytic capacity, but also can mediate cytokine production. We have demonstrated the ability of Ly-49A and Ly-49G2 to regulate production of cytokines by NK cells as a result of target MHC. The production of IFN-gamma and GM-CSF by NK cells were regulated by target cells expressing the appropriate class I molecules. Ly-49A and G2 were found to inhibit cytokine induction by NK cells. Examination of mRNA for IFN-gamma and GM-CSF indicated that Ly-49 receptors induced transcriptional regulation of NK cells. These results demonstrate that class I binding of these NK receptors can inhibit production of important physiological cytokines, in addition to the regulation of cytotoxic activity. Although infrequent on T cells, some CD3+ cells express Ly-49's. The non-MHC restricted lysis and cytokine production [IFN and GM-CSF] of CD3+, IL-2 cultured T cells were modulated by antibodies to either Ly-49A & G2 or to class I [H-2Ddalpha1/alpha2]. These results indicate that Ly-49 class I binding receptors, previously thought restricted to NK cells, can regulate important physiological functions of T cell subsets. Murine NK cells express both inhibitory (Ly-49A, C, & G2) and activating receptors (Ly-49D). This dichotomy of function between Ly-49 family members suggested different signaling events upon receptor/ligand interaction. We have demonstrated that: 1) in transfected Cos7 and murine NK cells Ly-49A, C, and G2 are phosphorylated following pervanadate stimulation, whereas Ly-49D is not; 2) monoclonal antibody-induced receptor ligation mediates tyrosine phosphorylation of Ly-49A and G2, but not Ly-49D; 3) SHP-1 coprecipitates with Ly-49A and G2 following receptor phosphorylation; and 4) tyrosine phosphorylation of Ly-49 inhibitory receptors may depend on tyrosine residues restricted to the ITIM (immunoreceptor tyrosine-based inhibitory motif). Our data further supports the involvement of ITIMs as crucial sequences regulating receptor-mediated inhibitory functions in NK cells.